The 2026 Infrastructure Funding Cliff: What Happens When the IIJA Expires
September 30, 2026. That date is on every state DOT's calendar, every transportation contractor's risk register, and every engineering firm's strategic planning discussion. On that date, the Infrastructure Investment and Jobs Act expires.
The IIJA was the largest federal infrastructure investment in a generation. Signed in November 2021, it authorized $1.2 trillion for infrastructure, including $550 billion in new investment above baseline levels. Since it passed, $591 billion has been directed to more than 72,000 projects nationwide. Roads have been paved, bridges repaired, water systems upgraded, broadband deployed to rural communities, and ports modernized. The law moved the needle. ASCE's 2025 Infrastructure Report Card awarded the country its best overall grade ever, a C, and credited the IIJA's investment as a primary driver.
But the IIJA was always a five-year bill. It covered FY2022 through FY2026. And as of April 2026, no replacement has been introduced in Congress. The House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee have been holding hearings. AASHTO released its reauthorization priorities in May 2025. State DOTs across the country have been running scenario planning exercises for months. The political machinery is in motion. Whether it produces a bill by September 30 is a different question entirely.
This post covers what the IIJA actually accomplished, what expiration means mechanically for different funding streams, what's already changed under the current administration, the realistic scenarios for what comes next, and what engineers, contractors, and developers need to understand about the six months ahead.
1. What the IIJA Actually Did
It's worth grounding the conversation in what the IIJA actually was before discussing what happens when it ends. The law wasn't a single program. It was a comprehensive investment package covering surface transportation, water infrastructure, energy, broadband, ports, and resilience, funded through a combination of Highway Trust Fund contract authority, advance appropriations from the general fund, and authorized programs subject to future appropriations.
On the surface transportation side alone, the IIJA increased average annual highway authorizations by roughly $28 billion above pre-IIJA (FAST Act) levels. The Bridge Formula Program directed $27.5 billion toward bridge repair and replacement over five years. The National Highway Performance Program and Surface Transportation Block Grant Program received funding at record levels. New competitive programs, including the MEGA grant for large freight and highway projects, the INFRA program, and the Multimodal Project Discretionary Grant program, created new entry points for states, cities, and regional transportation agencies to access federal capital for projects that would otherwise never have been funded.
Beyond transportation, the IIJA directed more than $55 billion to water infrastructure through the Drinking Water and Clean Water State Revolving Funds, $65 billion to broadband deployment through the BEAD program, $73 billion to power grid infrastructure, and billions more to ports, inland waterways, and hazardous waste cleanup. Each of those funding streams created a project pipeline that engineering firms and contractors have been executing on for the past four years.
The Scale in Numbers
The IIJA authorized $1.2 trillion total; $550 billion was new investment above prior baseline levels. As of January 31, 2026: $568 billion allocated across 68,000 projects, $275 billion obligated, and approximately $131 billion still becoming available for obligation in FY2026. The Department of Transportation received 74 percent of funds available for grants. Core formula programs for highways, bridges, and transit have been protected through FY2026. Water State Revolving Funds have $23.4 billion continuing to be distributedprogrammes through states.
2. The Funding Picture Has Already Gotten Complicated
Before we even get to expiration, it's important to understand that the IIJA has been operating under political friction for over a year. On January 20, 2025, President Trump signed an executive order titled 'Unleashing American Energy,' which directed federal agencies to pause disbursement of IIJA and IRA funds. The FHWA briefly stopped all IIJA reimbursements to states. That pause was clarified within days to apply only to programs the administration characterized as 'Green New Deal' projects, and formula programs for highways, bridges, and transit resumed normally.
But the episode highlighted something important: the IIJA's remaining unobligated funds are politically exposed in ways that obligated funds are not. Work already under contract with federal funds obligated is legally protected. Work that's been awarded but not yet obligated carries more uncertainty. Work that depends on new discretionary grant rounds is speculative.
What the FY2026 rescissions cut
The FY2026 spending legislation rescinded approximately $2.3 billion in IIJA allocations. The biggest target was the National Electric Vehicle Infrastructure (NEVI) program, which lost roughly $879 million across formula grants, competitive grants, and joint office funding. FEMA's Building Resilient Infrastructure and Communities (BRIC) program, which had distributed resilience grant funding to states, was ended entirely in April 2025, with no federal replacement.
Core formula programs were protected: National Highway Performance Program, Surface Transportation Block Grant, Bridge Formula Program, transit formula funding, and the water State Revolving Funds all continue at authorized levels. Broadband's BEAD program remains intact at $42.45 billion. The rescissions targeted specific programs, particularly those tied to electric vehicles and climate initiatives, not the infrastructure law's structural backbone.
What's Protected vs. What's Not
Projects already under construction with funds obligated: relatively secure. Projects awarded but not yet fully funded: carry uncertainty if they depend on programs that have faced rescissions or administrative review. Projects that anticipated future discretionary grant rounds: speculative until Congress acts on reauthorization. The BUILD grant program has $1.5 billion available for FY2026. MPDG (MEGA, INFRA, Rural) awards from the FY2025-2026 cycle are being distributed through 2026; whether DOT issues another NOFO before September depends on remaining unobligated funds.
3. What 'Expiration' Actually Means
The IIJA's expiration on September 30, 2026 doesn't mean all infrastructure funding stops on October 1. The mechanics are more nuanced than that, and understanding them matters for anyone trying to assess project risk.
Formula programs: the biggest pipeline
Formula programs, which allocate funding to states based on established formulas covering highway lane miles, vehicle miles traveled, bridge conditions, and similar metrics, are the largest category by dollar volume. These include the National Highway Performance Program, Surface Transportation Block Grant, Bridge Formula Program, and transit formula allocations. Under current law, these programs operate at IIJA funding levels through FY2026. Without a new surface transportation reauthorization bill, they revert to pre-IIJA baseline levels starting FY2027. That's a cut of approximately $28 billion per year from IIJA-era levels. State DOTs would receive dramatically less formula funding to program new projects, meaning the project pipeline entering planning, environmental review, and design would shrink significantly.
Short-term extensions of expired highway legislation, like the continuing resolutions Congress has passed before when negotiations ran long, can maintain programs at current levels temporarily. But they don't provide the multi-year certainty that state DOTs need to program and design complex capital projects. An extension that lasts two months doesn't let a DOT start a NEPA process for a project that needs three years of environmental review.
Discretionary programs: a harder stop
Many of the IIJA's competitive and discretionary programs, including MEGA, INFRA, the Rural Surface Transportation grant, and others, require active authorization to make new awards. When authorization expires, these programs stop accepting new applications and making new grants. Work already awarded and under contract continues. But the pipeline of new projects accessing these programs through a competitive process effectively ends unless Congress reauthorizes them. For communities and agencies that have been planning projects around future grant rounds, expiration without reauthorization is a real stop.
Water funding: a different timeline
Water infrastructure funding through the Clean Water and Drinking Water State Revolving Funds operates on a different mechanism than transportation formula programs. States haven't fully distributed their IIJA SRF allocations. Many state agencies are still working through application cycles for water main replacement, lead service line removal, and treatment plant upgrades. These programs continue distributing through state agencies and weren't affected by FY2026 rescissions. Water funding exposure from IIJA expiration is lower in the near term than transportation exposure, though future reauthorization will determine whether SRF capitalization grant levels are sustained.
| Program Type | Post-September Risk | Engineering Implication |
|---|---|---|
| Highway/bridge formula (NHPP, STBG, Bridge Formula) | High without reauthorization: reverts to pre-IIJA baseline, approx. $28B/year less | New project programming freezes; design pipeline shrinks; rehabilitation-focused work continues |
| Transit formula (FTA Section 5307, 5337, 5339) | High without reauthorization: same formula rollback dynamic as highway programs | Transit capital programs pause new procurement; engineering and design contracts thin out |
| Competitive/discretionary (MEGA, INFRA, BUILD, Rural) | Very high: no new awards without reauthorization; awarded projects continue | Firms dependent on discretionary grant work face pipeline gap; obligated projects protected |
| Water SRFs (Clean Water and Drinking Water) | Low near-term: unobligated IIJA allocations still distributing through states | State SRF programs continue; lead service line and PFAS treatment work largely unaffected |
| BEAD broadband ($42.45B) | Moderate: program intact; distribution depends on state plan execution timelines | Broadband infrastructure design and permitting work continues as states spend allocations |
| BRIC resilience grants (FEMA) | Ended April 2025, no replacement | Resilience-focused project funding gap; state-funded programs vary in coverage |
4. The Reauthorization Picture: Five Hard Reasons to Take the Uncertainty Seriously
The conventional wisdom in Washington is that Congress will find a way. Transportation reauthorization is bipartisan, the argument goes. It always gets done. Look at the IIJA itself.
That optimism deserves some scrutiny. Transportation for America, which has tracked surface transportation legislation since 1991, has documented that Congress operated on short-term extensions of expired transportation laws for roughly a third of the time since that year. The last two bills both required multiple extensions before final passage. As of April 2026, no new surface transportation bill has been introduced in either chamber.
The five structural problems
• The HTF math doesn't work at IIJA spending levels. The gas tax brings in about $44 billion per year. A reauthorization at IIJA spending levels would spend over $102 billion annually. That $58 billion annual deficit would have to be covered by deficit spending, a transfer mechanism Congress found once in 2021 with advance appropriations but has no obvious equivalent tool for in 2026.
• The advance appropriations trick can't be repeated easily. The IIJA used a novel funding mechanism, advance multi-year supplemental appropriations from the general fund, to paper over the HTF structural deficit. That mechanism was scored as deficit spending and attracted political resistance even in 2021. Using it again at the same scale in the current fiscal environment, with the national debt approaching $40 trillion and significant Republican resistance to new deficit spending, is genuinely harder than it was five years ago.
• The bipartisan coalition is more fragile. The administration has unilaterally rescinded certain IIJA programs, undermined others through spending freezes and legal challenges, and signaled preferences for a refocused federal transportation program centered on core highway priorities. That approach has strained the transit, rail, and multimodal advocacy constituencies that helped build the bipartisan support for IIJA. If the next bill drops transit and passenger rail funding significantly, it loses the Democratic coalition votes that made IIJA possible.
• History says extensions are the likely near-term outcome. Since 1991, the country has been on short-term extensions of expired transportation laws for roughly a third of the total time. The FAST Act required extensions before passage. IIJA itself was negotiated over more than a year after initial proposals emerged. A two- to six-month extension past September 30 is a more historically realistic near-term outcome than a fully negotiated five-year bill.
• The political calendar is compressed. As of April 2026, no bill has been introduced. The September 30 deadline gives Congress about six months. A surface transportation reauthorization typically involves hundreds of program-level decisions on funding allocations, formula factors, eligibility rules, and policy requirements. That level of complexity doesn't get resolved in six months under ordinary political circumstances, much less in a divided and distracted Congress.
5. What State DOTs Are Already Doing
State transportation departments don't wait for certainty that never arrives. They plan for ranges of outcomes and position their capital programs accordingly. What's happening in state DOTs right now is a preview of what the industry will look like if reauthorization is delayed.
AASHTO released its official reauthorization recommendations in May 2025 and its Vision and Core Policy Principles in April 2025, signaling that the state DOT community was already in active advocacy mode well before the September deadline. California convened a Federal Affairs Working Group in January 2025, running more than ten subgroup meetings with over 1,000 participants to develop reauthorization priorities. CALTRANS and CalSTA submitted California's federal surface transportation reauthorization principles document for public comment in early 2026.
At the project level, DOTs are making a specific set of adjustments that engineering firms working with them can see directly. They're deprioritizing discretionary program applications for projects that won't reach construction before authorization expires. They're phasing multi-year programs into smaller scopes that can be obligated quickly. They're moving preservation and rehabilitation work forward over capacity expansion, because preservation projects are faster to obligate and less exposed to multi-year funding uncertainty. And they're actively asking engineering consultants to be ready to accelerate projects toward obligation before September 30 wherever possible.
The Steam Engine Problem
At ASCE's 2025 Solutions Summit, Connecticut DOT Commissioner Garrett Eucalitto, who also serves as AASHTO president, put the workforce dimension of reauthorization uncertainty in direct terms: infrastructure investment works like a steam engine. It takes time to get going. If the program stops or slows after five years of building momentum, the skilled welders, technicians, and tradespeople who moved to infrastructure work can easily go to submarine manufacturing or other industries. Once they leave, they don't come back to build roads and bridges. The workforce effect of reauthorization uncertainty compounds the funding effect.
6. The Scenarios: What Actually Happens After September 30
There are four realistic outcomes from the September 30 deadline, ranging from best to worst case for the engineering and construction industry.
Scenario 1: A new five-year bill passes on time
The optimists' scenario. Congress negotiates and passes a full surface transportation reauthorization before September 30, 2026. Funding continues at or near IIJA levels for FY2027 through FY2031. State DOT pipelines continue uninterrupted. The engineering design and construction workload built on IIJA-era investment continues. This outcome requires resolving the HTF structural deficit question, which requires either new revenue, a new borrowing mechanism, or a significant reduction in program scope. As of April 2026, no bill has been introduced. The probability of a complete, on-time bill is not zero, but history and political dynamics suggest it's not the most likely scenario.
Scenario 2: A short-term extension, then a new bill
The most historically common outcome. Congress passes a two- to twelve-month extension past September 30, maintaining programs at current authorized levels while negotiations continue. Formula funding continues flowing to states. Discretionary programs are technically extended but may not make new awards during the extension period. Engineering firms and contractors see a slowdown in new project initiations but not a sharp cutoff. This scenario buys time but doesn't provide the multi-year certainty that complex capital programs need to move forward confidently.
Scenario 3: An extension at reduced funding levels
A harder outcome. Congress extends surface transportation programs but at funding levels calibrated to available HTF revenues, roughly $40 to $44 billion per year, rather than the $55+ billion per year of IIJA-era spending. That represents a cut of roughly $11 to $15 billion per year from current levels. State DOTs would face immediate program reductions. Projects in planning would be deprogrammed. Engineering workload would drop sharply for discretionary and formula program work. This scenario is more likely if deficit-reduction pressures dominate the political negotiation rather than infrastructure investment advocacy.
Scenario 4: No extension, no new bill
The worst case. Authorization lapses without any action. Formula programs revert to pre-IIJA baselines. Discretionary programs stop making new awards entirely. State DOTs scramble to protect obligated work and deprioritize everything else. New project initiations effectively stop for months or longer. The construction industry experiences a sharp demand contraction precisely at the moment when it has built staffing, equipment, and capacity around IIJA-era demand. Historical precedent makes a complete lapse unlikely, but the current political environment makes it less dismissible than it would have been in prior cycles.
7. What This Means for Engineers, Contractors, and Developers
For engineers
The project pipeline risk is real and it starts now. If you're working with state DOT or municipal clients on projects that depend on IIJA discretionary programs for their funding, you should have explicit conversations with those clients about where each project sits in the risk spectrum: obligated, awarded-not-obligated, or anticipated-not-awarded. The first category is protected. The second carries uncertainty. The third is at serious risk without reauthorization.
The shift toward preservation and rehabilitation over capacity expansion that ASCE and ENR have documented in agency project programming isn't a temporary trend. It's the rational response to funding uncertainty, and it's likely to persist regardless of how reauthorization resolves. Engineering firms that have strong rehabilitation capabilities, transportation asset management experience, and the ability to deliver projects quickly from a standing start are better positioned in this environment than firms oriented primarily toward new facility design.
The ASCE reauthorization advocacy priorities are worth reading and engaging with. ASCE has outlined five umbrella priorities for the next bill: sustaining investment levels, prioritizing safety, enhancing project delivery, improving operations and maintenance, and preparing for the future. These priorities translate directly into the types of engineering work that will be rewarded in the next authorization cycle. Aligning your firm's capabilities and your client conversations with those priorities is both good advocacy and good business development.
For contractors
Know your pipeline exposure. The most useful analysis you can do right now is categorize your backlog and near-term opportunities by funding source and obligation status. Work already under contract with funds obligated is relatively secure regardless of what happens in September. Work that depends on new federal awards is not. Contractors who have diversified their project mix across state-funded, locally funded, and federally funded work are less exposed to a reauthorization lapse than those concentrated in federal program work.
IDIQ and JOC vehicles are your best protection. Indefinite delivery, indefinite quantity contracts and job order contracts allow agencies to execute work against pre-negotiated terms without going through a full procurement for each project. If you're on these vehicles already, work placed under those contracts after September 30 is generally protected if the underlying contract was awarded before authorization expiry. Getting on these vehicles before the deadline is meaningfully better than pursuing individual awards after it.
For developers and property owners
The connection between federal infrastructure funding and development feasibility is real, even if it's indirect. A reauthorization at significantly reduced levels means state DOTs spending less on capacity expansion, which means access road improvements and interchange upgrades that enable development in growing corridors get delayed or cancelled. It means higher infrastructure impact fees as localities scramble to maintain systems with less federal support. And it means that the confidence developers need to commit to long-cycle projects in infrastructure-dependent corridors takes a hit.
If you're evaluating sites in corridors where transportation capacity improvements are part of your feasibility case, understanding where those improvements sit in the state Transportation Improvement Program and what federal funding they depend on is worth the effort now, before you're six months into a project when that information would have changed your decision.
Conclusion: The Countdown Is Real
The IIJA expires September 30, 2026. That's not a theoretical scenario for future planning. It's five months away as of the date of this post, and no replacement bill has been introduced. The engineering and construction industry that has built significant capacity on IIJA-era investment levels is running a countdown.
The outcome is genuinely uncertain. A bill could pass on time. It could pass late with an extension. It could come in at reduced levels. Or it could lapse entirely, at least temporarily, before something gets done. The range of outcomes is wide, and the consequences of the lower end of that range for the engineering project pipeline are significant.
What's not uncertain is that the decision will be made in the next six months, and that the engineering community has a role to play in shaping it. Every ASCE member who talks to a congressional representative about why infrastructure investment matters. Every state DOT commissioner who testifies at a hearing about what a funding cut would do to their project pipeline. Every contractor who explains to a small-business congressional constituent what their workforce looks like under continued investment versus a sharp reduction. These conversations are the inputs to the political decision that produces or fails to produce the next reauthorization bill.
The work depends on the funding. The funding depends on reauthorization. And reauthorization depends on whether enough people make the case loudly enough that it happens.
